On September 17, the National Bank of Ukraine tightened monetary policy for the second time in a row, raising the key interest rate from 15.5% to 16% per annum. The decision takes effect on September 18. In this way, the financial regulator is seeking to curb inflation, support demand for hryvnia savings, and reduce pressure on the foreign exchange market. UNN takes a closer look.
What decision did the NBU make regarding the key interest rate?
The NBU Board raised the rate by 0.5 percentage points, to 16%. This is the second consecutive increase: on July 30, the regulator raised it from 15% to 15.5%, effectively reversing the easing cycle that began at the start of 2026.
The National Bank explained its September decision by pointing to persistent underlying price pressures, second-round effects from supply shocks, and growing medium-term pro-inflationary risks. In August, consumer inflation accelerated to 8.1% year-on-year and was somewhat higher than the NBU's July forecast. One of the key factors was a more pronounced-than-expected rise in fuel prices amid the escalation in the Middle East. Additional pressure is being exerted by high business costs for energy, logistics, and labor, as well as the consequences of Russian attacks on infrastructure.
Why was the rate raised to 16%, and for how long?
The NBU is currently trying to prevent temporary price shocks from turning into persistent inflation. When households and businesses expect prices and devaluation to continue rising, they spend hryvnia more quickly or convert their savings into foreign currency. A higher rate is intended to work in the opposite direction: making hryvnia deposits and government bonds more attractive and reducing demand for foreign currency.
It should also be emphasized that the current increase does not represent a sharp change in direction. Back in its July macroeconomic forecast, the NBU had projected an increase in the rate to 16% in the fourth quarter of 2026 and its retention at that level in the first quarter of 2027. Policy easing was forecast to begin in the second quarter of 2027, with a gradual reduction of the rate to 14% by the end of 2027. At the same time, the NBU is retaining the option to adjust its policy depending on risks. If inflationary pressures or expectations worsen, the regulator may undertake further tightening. If a deterioration in the security situation causes a noticeable cooling of consumer demand and the labor market, the National Bank allows for a relaxation of monetary conditions.
How will the decision affect loans, deposits, and inflation in Ukraine?
For depositors, the decision is more likely to be positive. Following the July rate increase, some banks had already begun raising the returns on hryvnia deposits. Against this backdrop, the NBU's additional step creates incentives to keep deposit rates at an attractive level. The high yields on hryvnia domestic government bonds will also remain one of the instruments through which the regulator seeks to keep savings in the national currency.
The effect on lending is more complex. In the classic model, a higher key interest rate means more expensive funding for banks and, accordingly, more expensive loans for households and businesses. However, in wartime conditions, this relationship is less direct because of government lending programs, high bank liquidity, and regulatory incentives. The NBU itself estimates that raising the rate to 16% will not have a significant restraining effect on lending and emphasizes the prolonged period of credit expansion.
For inflation, this decision by the financial regulator will have a delayed effect. The key interest rate cannot make oil cheaper, restore energy facilities, or eliminate logistical risks, all of which significantly affect the rate at which the national currency loses value. Its purpose is to prevent an initial surge in costs from triggering broader price growth through demand, the hryvnia exchange rate, and inflation expectations. That is why the NBU is relying not only on the direct impact of high rates but also on maintaining exchange-rate stability.
What will happen next to the monetary policy of the national regulator?
The NBU’s basic signal is quite hawkish at present: the regulator is not promising a quick return to cheap money. The July forecast trajectory envisaged keeping the rate at 16% at least until the end of the first quarter of 2027. At the same time, the September decision shows that the National Bank is ready to respond if actual inflation or risks deviate from the forecast.
Under the current conditions, a high interest rate helps protect hryvnia savings, stabilize the foreign exchange market, and contain inflation expectations, but at the same time it does not create conditions for a rapid reduction in market lending rates. In the coming months, the key factors for the NBU will remain actual inflation, the situation in the energy sector, fuel prices, the state of the foreign exchange market, international financing, and the intensity of the war.
Therefore, the current 16% increase in the key policy rate is primarily a signal that tight monetary conditions will be maintained. If inflation begins to slow steadily, room for a rate cut may emerge in 2027. If price risks intensify, the period of "expensive" hryvnia will last longer.